What are ARC-20 tokens?
ARC-20 tokens are a type of digital asset created based on the Atomicals protocol. These fungible tokens represent ownership of assets on the Bitcoin network.
ARC-20 offers a method for creating, transferring, and managing digital assets in the Bitcoin ecosystem, utilizing the protocol's capabilities to implement unique digital ownership rights.
How do ARC-20 tokens work?
ARC-20 tokens are pegged to the value of at least one satoshi (the smallest unit of bitcoin). This ensures that each ARC-20 token has a minimum value and cannot drop in price below 1 satoshi. They can be used, transferred, and divided just like regular units of bitcoin.
All ARC-20 tokens have a built-in ticker and naming system, which empowers each token with a unique identifier. Additionally, these assets store the entire transaction history from the moment of their creation, eliminating the need for a centralized indexing service and enhancing transparency and security.
What is the Atomicals protocol?
The Atomicals protocol is an open-source system designed for creating digital objects called Atomicals ('atoms') on Bitcoin and other blockchains that use the unspent transaction output model or UTXO.
These digital objects can be static or dynamic, including both fungible and non-fungible tokens (NFTs). Atomicals are created using transactions on Bitcoin and are compatible with any Bitcoin wallet, eliminating the need for additional blockchains, second-layer networks, or third-party services.
Decentralized creation and direct creation
ARC-20 tokens can be created in two main ways: decentralized and direct.
In decentralized creation, parameters such as the total number of coins, creation rewards, and creation conditions can be specified. However, the distribution of these tokens is carried out in a decentralized manner, and anyone can gradually create new coins according to the specified parameters.
Direct creation, in turn, implies the development of a single transaction output containing the entire supply of tokens. This approach grants creators full control over the supply and distribution of tokens but requires prior possession of satoshis equivalent to the token supply.
Applications
ARC-20 tokens offer a streamlined approach to token management. This standard simplifies the creation and transfer of assets in the Bitcoin ecosystem. ARC-20 tokens open up new opportunities for decentralized finance, asset tokenization, digital identity, and other tasks.
ARC-20 tokens can be used in various fields, including:
Media, digital collectibles, and art.
In-game assets.
P2P exchange and atomic swaps.
Digital identification and authentication.
Web hosting and storage.
Virtual land and property rights.
Social networks and online communities.
Comparison of Atomicals and Ordinals protocols
Although both Atomicals and Ordinals allow for the creation and management of digital assets, the Atomicals protocol supports some unique features. Unlike Ordinals, which retains only one file when creating a token, Atomicals can store multiple files. It uses P2TR addresses (Taproot) only for creation and updates, whereas Ordinals requires an address for all operations. Additionally, the Atomicals protocol includes a built-in ticker naming system and prevents the misuse of miner fees, enhancing security and efficiency.
